WEG S.A. (WEGZY) Q4 2022 Earnings Call Transcript

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WEG S.A. (OTCPK:WEGZY) Q4 2022 Earnings Conference Call February 16, 2023 9:00 AM ET

Company Participants

Andre Rodrigues - Chief Financial Officer

Andre Salgueiro - Finance Director & Investor Relations Officer

Conference Call Participants

Lucas Laghi - XP Investimentos

Marcelo Gumiero - Credit Suisse

Andre Masini - Citibank

Alberto Valerio - UBS

Marcelo Motta - JPMorgan

Rogerio Araujo - Bank of America

Josh Milberg - Morgan Stanley


Good morning. Welcome to nan Conference Call of WEG. We released nan results of nan Fourth Quarter [ph] of 2022. We are transmitting this convention telephone on pinch nan slides successful our Investor Relations website astatine nan reside, and aft its completion nan audio will beryllium disposable for you astatine our investor relations website. [Operator Instructions]

Any forecasts and nan documents aliases immoderate statements made during this convention telephone astir early events, business prospects, operational and financial projections and goals and besides to a imaginable of early maturation of WEG are adjacent beliefs and expectations of nan WEG's guidance and they are based connected accusation presently available. Forward-looking statements impact risks and uncertainties and therefore, dangle connected circumstances that whitethorn aliases whitethorn not occur. Investors should understand that wide economical conditions, manufacture conditions and different operating factors whitethorn impact nan early capacity of WEG and lead to results that will beryllium disagree materially from those expressed successful specified forward-looking statements. As a reminder this convention telephone is being conducted successful Portuguese, and you're listening to nan simultaneous mentation into English.

Today pinch america successful Jaragua do Sul, we person Mr. Andre Lua­s Rodrigues, Administration and Finance Officer and Andre Menegueti Salgueiro, CFO and IR; Wilson Watzko, Controller; and Felipe Scopel Hoffmann, Investor Relations Manager.

Mr. Andre Rodrigues, you whitethorn start.

Andre Rodrigues

Good morning, everyone. It's a pleasance to beryllium pinch you once again for nan convention telephone of WEG. I would for illustration to commencement pinch nan quarter's highlights, wherever nan nett operating gross grew 22% arsenic compared to 4Q 2021. We person maintained a accordant maturation successful this 4th arsenic a consequence of affirmative request successful nan main markets wherever we operate, mixed pinch our strategy of merchandise diversification and world presence.

EU, location was bully request for business instrumentality specified arsenic electrical motors and automation components, arsenic good arsenic successful solutions related to procreation of renewable energy, particularly successful nan business is related to erstwhile nan star procreation summation to nan beardown capacity successful transmission and distribution.

In a overseas market, nan capacity was besides affirmative pinch nan attraction of income measurement successful nan area of business physics instrumentality and maturation successful income successful procreation transmission and distribution of power arsenic a consequence of nan portfolio that we've built passim nan year, particularly successful transmission and distribution businesses.

Another item of nan 4th was our EBITDA which reached BRL1.8 billion, pinch a maturation of 38.6% arsenic compared to nan 4th fourth of 2021. Our EBITDA separator closed nan 4th astatine 19.5%, a maturation of 2.3 percent points arsenic compared to nan aforesaid play past year. Along nan presentation, Andre Salgueiro is going to springiness you much specifications astir this performance.

ROIC, you're going to spot connected nan adjacent descent has reached 29.4%, a 1.1 percent constituent simplification arsenic compared to Q4 '21, particularly owed to nan maturation and nan superior deployed, chiefly explained by investments successful fixed and intangible assets successful a period. It's important to item nan 1.5 percent points maturation successful narration to Q3 2022, supported by nan maturation successful gross and operating margins.

Now I would for illustration to springiness nan level to Andre Salgueiro to continue.

Andre Salgueiro

Thank you, Andre. On Slide number five, you tin spot nan improvement of our business areas. In nan markets wherever we run successful Brazil, we proceed to person a bully capacity successful physics and business instrumentality pinch bully request for short rhythm instrumentality specified arsenic electrical engines and reducers, pinch a item to segments related to agribusiness and unfastened paper.

Well, we besides noted bully request and agelong rhythm instrumentality specified arsenic mean voltage, electrical motors, information panels, particularly successful lipid and state mining and pulp and paper. In GTD, we noted nan maturation successful each business lines successful Brazil. In summation to nan continuity of nan transportation of wind, nan turbines this shows nan capacity of distributed star procreation alternators.

T&D business had bully gross volumes driven by transformer deliveries to respective awesome segments specified arsenic transmission, renewable distribution and industrial. In commercials engines and appliances, frankincense acold nan bully income measurement successful immoderate segments we noted an oscillation successful request from immoderate important customers and peers specified arsenic manufacturers of washing machines and centrifugal pumps. Finally, nan request for overgarment and varnish products was positive, particularly successful nan conception of metallic structures and maintenance.

In world market, we maintained bully request and among different business segments wherever we operate, contempt nan volatility successful immoderate regions. The item was nan bully capacity successful United States. In Europe, contempt nan interest pinch nan governmental and economical script successful nan region, we observed amended billing and bid placement for agelong rhythm equipment, particularly for gas, mining and h2o and sanitation projects, thereby contributing for nan building of a patient aliases their portfolio.

In GTD and T&D income show a affirmative quarter, particularly successful North America wherever we proceed to return advantage of nan opportunities successful procreation business. We item nan bully capacity successful our operations pinch an accent pinch nan accumulation of hydro generations successful commercialized motors and appliances. We not that nan gross level gross level erstwhile compared to nan aforesaid play successful nan twelvemonth before.

Despite nan accommodation successful income measurement successful immoderate markets specified arsenic North American Argentina in, we had a income advancement successful our Mexico operation, which contributed nan maturation arsenic compared to nan aforesaid play nan twelvemonth before. On descent six, you tin spot nan improvement of theta, which drew 38.6% compared to Q4 '21. The ETA separator ended nan tribunal astatine 19.5%, 2.3 percent points higher than nan aforesaid play nan twelvemonth before.

This consequence is nan is simply a reflex of stabilization of costs successful caller 4th and nan expanding betterment successful nan capacity of our overseas operations. Finally, connected descent opportunity seven, you tin spot nan improvement of our investments. We person invested 431 cardinal b l connected nan 4th modernization, description of manufacturing headdress capacity, machinery and instrumentality and caller products. 42% of which were meant for manufacturing units successful Brazil and 48% were meant for business complexes and different accommodation abroad.

Now I, my portion and I springiness nan level backmost to entry. Before we move to our q and a station, I would for illustration to talk astir immoderate of our astir caller accomplishments and to talk astir our imaginable for this year. With regards to achievements, I would for illustration to item nan pursuing caller events. So first we consolidated nan first and largest 2 units of centrifugal power section successful Italy successful Germany, which were acquired past August.

In November, we opened nan caller veg motor mill successful Algeria dedicated to manufacturing engines for location appliances, particularly washing machines. Finally, an outlook for nan remainder of nan year. We started pinch a robust bid portfolio for agelong rhythm projects, some successful manufacturing and successful projects successful lipid and gas, mining, unfastened insubstantial arsenic good arsenic successful GT t d successful transmission and distribution procreation projects, which should lend to a maturation successful gross successful nan portion of nan business some successful Brazil and overseas.

The standardization of proviso chains associated optimization of costs of nan main earthy worldly should lend to nan operational dynamics passim nan year. On nan different hand, we must support an oculus connected nan world macroeconomic script and imaginable related risks and volatilities some successful nan home and internationals scenarios.

Now, I extremity nan presentation. Operator, please, we whitethorn move to nan Q&A session.

Question-and-Answer Session


[Operator instructions] Our first mobility comes from [indiscernible] from Itau BBA.

Unidentified Analyst

Good morning, everyone. Can you perceive me? Thank you. Good morning. I would for illustration to get much specifications astir 2 things. First, I would for illustration to and understand amended electro physics instrumentality successful nan overseas market. We person that North American marketplace consolidated nan use GTD, but erstwhile we look nan variety of revenues extracurricular nan American market, it's flat.

So what happened successful nan North American marketplace and nan aforesaid point applies to Europe. We understand that we had nan use of nan consolidation, but location was a very beardown maturation successful Europe, particularly related to physics equipment. So I would for illustration to understand much astir nan short word dynamics quarter-on-quarter and what you're seeing this twelvemonth for these 2 markets, some nan North American and Europe. And I would for illustration to understand much astir marketplace share. In immoderate caller event, we've heard astir Siemens, your section market, possibly you should time off conscionable motors and attraction much software.

So what do you spot successful position of your marketplace stock particularly successful nan European marketplace particularly comparing to Siemens. Siemens are carving retired their motor aliases their centrifugal operations. So usually attraction much connected exertion and markets that aren't smaller. Would it make immoderate consciousness for america to deliberation of a carve retired of nan motors cognition globally speaking? That's it. Thank you very much.

Andre Salgueiro

Good morning. Thank you for your questions. This is Andre Salgueiro. I will reply nan first portion astir revenues from nan overseas marketplace and past he will talk astir marketplace stock arsenic to North America. When we look astatine nan region arsenic a whole, we person a affirmative capacity and beardown demand. And nan item successful nan region was T N D, particularly because of transformers successful Mexico and nan US. When we look astatine different businesses, we are not seeing revenues shrinking isolated from pinch commercialized motors and appliances wherever we person since immoderate accommodation successful a q4 arsenic compared to Q3.

But overall, nan manufacturing dynamics is affirmative and nan only point that we should look astatine short cycle, particularly comparing q4 pinch a q3, location whitethorn beryllium immoderate seasonality towards nan extremity of nan twelvemonth that mightiness effect this dynamic. On nan different hand, erstwhile we look astatine nan Europe, it had affirmative capacity and we mentioned this successful our belief is somewhat supra what we expected earlier successful nan quarter, but this is very overmuch related to a project.

So location is business and electro physics instrumentality which drives nan growth. And you mentioned nan consolidation of different aft November, but besides are nan businesses performing very good successful Europe and projects arsenic we've been seeing agelong rhythm some for lipid and gas, h2o and sanitation. We person a important attraction of OEMs for these types of projects successful Europe.

So we had a very beardown larboard because of request successful Europe. Hi Daniel. Thank you for your question. I will effort to reply nan 2nd portion of your mobility arsenic for a, a marketplace stock connected the, our past time we had a very elaborate position and talking astir nan institution and opportunities that we are seeing arsenic a consequence of vax internationalization task pinch solutions and besides nan truth that we are going into immoderate caller segments.

I deliberation that this activity is going to continue. Last twelvemonth was very positive, astir businesses had very bully capacity and we are going to proceed moving to support that. And I deliberation that location are galore opportunities successful nan marketplace which are portion of nan company's internationalization process. And truthful this is nan affirmative and we dream to proceed advancing successful nan main markets and wherever we are starting to person our presence. Another point is that VA ever analyse. We don't usually talk astir nan processes that are successful nan marketplace aliases astir to spell to market. So we tin talk astir these things.


Our adjacent mobility comes from Lucas Laghi from XP Investimentos.

Lucas Laghi

Good greeting Rodriguez. Sal, congratulations connected nan results. There are 2 things I would for illustration to research pinch you. The first 1 is related to nan 4 months. You show america a spot much astir European marketplace towards nan extremity of 2 and nan macroeconomic is much challenging successful position of recession and proviso chain. So really is veg behaving successful this market?

So we person much vulnerability to exports and you're exposed to problems. Was location immoderate reflex successful your strategist successful nan 3rd quarter, particularly pinch regards to motors? I would for illustration to understand the, nan company's position successful European market. And nan 2nd mobility that is much circumstantial astir taxes now astir 40 cardinal b l successful summation to what is astir recurrent successful position of taxation assets.

So you reduced 3 points effective complaint truthful tin you springiness america much specifications astir that rate? And do you person immoderate updates successful position of nan provisional measurement successful Brazil successful position of taxation rates and its effect connected that erstwhile thing you whitethorn opportunity will thief us? So these are nan 2 things I would for illustration to inquire astir European marketplace and nan taxation complaint successful Brazil.

Andre Salgueiro

Answering your mobility pinch regards to Europe arsenic a region, Europe is simply a very important region for our company. It's nan 2nd biggest region successful position of relevance successful position of world revenues. And arsenic we said successful nan past, yes, we do person immoderate important operations successful Europe, particularly successful Portugal and Austria, and galore of nan products that we waste successful Europe, we manufacture, particularly present successful Brazil aliases moreover successful China, particularly nan engines pinch aluminum casing.

So since nan opening of past year, Europe, nan business is very circumstantial successful nan imaginable towards nan extremity of nan twelvemonth successful nan past 4th was to person a very beardown power situation because of nan conflict and power and past whitethorn beryllium a slow down an economical activity, which somehow, astatine slightest successful nan short term, was not arsenic important arsenic we thought it wouldn't be.

So this effect and nan operation of little terrible wintertime and arsenic we equalize that nan power did not person specified an effect connected nan short word economical activity successful immoderate way, this is thing that we request to monitor. We tin opportunity that this is wholly solved. As we usually opportunity successful Europe, location is much attraction of income aliases short rhythm products.

So we don't person specified a agelong portfolio of visibility. We request to show period from period to spot nan dynamics complete nan adjacent fewer quarters. What we tin spot now successful position of agelong rhythm portfolio, location are immoderate projects and immoderate important deliveries complete nan adjacent fewer months and quarters. And successful position of short cycle, we are seeing immoderate isolation successful immoderate countries, but we cannot opportunity that the, it's a downward trend. It's much towards nan stability, it's level nan scenario.

So we request to show nan short rhythm from now on. Now this is Rodriguez, and we would like, I would for illustration to item 2 points. First, nan higher measurement of income successful nan overseas market, which has contributed to simplification successful effective rate, and past then 1 disconnected effect of income taxation and societal publication connected liking rates and prime that had an impact.

When we spell to 1152, nan Brazilian rule is that we are monitoring this and this rule will enforce changes connected transportation pricing rules successful Brazil. And what we expect is first of each this is conscionable a measure that still needs to beryllium approved successful a legislature earlier it becomes a law. So, it'll beryllium -- it'll spell to an arm's magnitude concept. The arm's magnitude conception includes 5 different types of methodology 4 to specify everything, and you dangle connected each nan rules from that are enacted.

And I'm trying to beryllium acquisition saying that location are still immoderate phases earlier we cognize amended what is going to happen. And if everything happens during nan deadline, location mightiness beryllium an effective effect successful nan income taxation arsenic of 2024 if this measure is presented arsenic it is successful nan provisional measure. So nan existent building that we person coming needs to make sense. So nan stock impacted of our operations is showed successful nan statement of nan complaint quality and we are publishing that.

And correct now, because of nan uncertainties that I person mentioned, measurement by measurement is difficult for america to person an meticulous estimate of that effect successful immoderate way. I would for illustration to opportunity that we judge that location will beryllium a benefit. It still makes consciousness moreover aft nan measure is approved. And erstwhile we spot immoderate will travel pinch a provisional measure, we are going to springiness you much information.


Our adjacent mobility comes from [indiscernible]


Good greeting everyone. Congratulations connected nan twelvemonth and connected your performance. I would for illustration to touch a constituent that earlier past year, I deliberation we mentioned that correct aft nan convention telephone of nan Q4 2021, I would for illustration to spell backmost to that point. Back past we had a interest pinch a imaginable down and we were seeing immoderate effects, particularly slow down extracurricular Brazil.

And 1 of nan points that were addressed successful 1 of our convention calls was precisely pinch regards to your agelong rhythm gross backlog. I would for illustration to understand what it is for illustration comparing it to past twelvemonth and now successful nan opening of this twelvemonth successful percent terms. If you could show that was, I tin do tons of calculations and it'll beryllium very helpful. Thank you.

Andre Rodrigues

This is Andre Rodrigues. I'll show you much astir nan backlog. First of all, erstwhile we talk astir business electro physics equipment, we are seeing a bully continuity successful orders being placed on nan s some successful Brazil and successful nan world market, successful this business line, particularly pinch lipid and state mining and pope and paper. And truthful location is simply a bully capacity and they proceed business el physics equipment.

And truthful we person a patient portfolio. Now, erstwhile we spell to GTD we commencement pinch a robust portfolio erstwhile we talk astir Brazil, we tin talk astir transmission and distribution auctions. Last twelvemonth we had 2 auctions full successful adjacent to BRL19 cardinal successful June and December very affirmative and this for that number to spell to twofold. So BRL50 cardinal location will beryllium auctions, if I'm not mistaken successful July and December. So it's not a bully portfolio and affirmative outlook for this year. Still successful G T D if we look astatine wind. So we person a portfolio pinch schedules until nan mediate of 2024. This hasn't changed successful star waste of instrumentality for

Solar plants; we person bully prospects this twelvemonth and besides a bully portfolio for electrical generators, particularly from hydro and thermal source. So this is affirmative successful Brazil. Now, if you look astatine nan world marketplace thing has changed successful position of what we are ever telling you.

Once again, successful North America, still person a agelong beardown request from procreation and transmission pinch aerial generators; South Africa besides pinch sewage prospects for transmission and distribution. So successful this manner, we person started this twelvemonth arsenic we started 2022 pinch a very affirmative portfolio for nan company's agelong rhythm portfolio.


Thank you very overmuch and congratulations connected your capacity erstwhile again.


Our adjacent mobility comes from Marcelo Gumiero from Credit Suisse.

Marcelo Gumiero

Good morning, everyone. Thank you for taking my questions and congratulations for your capacity successful 2022. I person a circumstantial mobility astir margin. So your margins compared to a very beardown level that you had successful nan past 4th and what do you spot successful 2023 successful position of profitability?

So we spot a slowdown and nan prices of commodities globally and really is this translated into opportunities for 2023 years compared to a much competitory pricing dynamics. So if you comparison to your peers successful position of diversification, pricing and everything. And, and different question, a travel up.

Globally, we spot galore inducement programs for nan power transition. So successful US and Europe, very important projects successful look value, it's billions and billions of dollars. So successful nan end, are utilizing that this type of inaugural has contributed to warming up demand. What do you spot successful position of projects? Are location immoderate differences? Do you spot an impact? Those were my 2 questions. Thank you very overmuch for taking them.

Andre Rodrigues

Hi Marcello, this is Andrea Rodriguez entering, I'll talk astir margins and past Salgado will reply the, your 2nd question. First of all, we should retrieve that moreover though our institution does supply immoderate guidance of projected margins our margins should be, should see longer periods. So we are successful nan opening of nan twelvemonth and today, considering our existent visibility, our margins will be, we will beryllium probably, we will beryllium capable to present margins that are akin to what we had successful different years.

And truthful sometimes a attraction connected effects variations. We've been seeing immoderate volatility successful nan past fewer weeks and this is apt to proceed immoderate volatility successful nan slowdown successful nan world macro scenario, I deliberation that San NATO Salgado talked astir that and variations successful nan costs of commodities for agelong periods. So nan main connection is that we'll proceed moving to present margins supra those of nan market.

Marcello, arsenic to nan power modulation and each actions that person been going connected some successful nan United States and successful Europe, they're each very positive. And it's important to constituent retired that astir of our businesses are exposed to this caller inclination and nan astir caller trend. And truthful we spell from nan manufacturing erstwhile we talk astir motors pinch much power ratio automation solutions that whitethorn thief to trim conception of power and besides electrical mobility, electrical and sometimes particularly focusing connected heavier automobiles specified arsenic trucks and buses.

So it's intrinsic to galore to bully information of our businesses arsenic we've been doing. So we spot this is simply a very absorbing opportunity. It's difficult to measurement correct now really overmuch this is already happening. Concretely speaking, I deliberation that successful nan mid and agelong word it sounds for illustration this is simply a very affirmative opportunity to opportunity that this has already moved nan needle for america correct now. It's very difficult for america to person that cognition because arsenic I said, this permeates astir of nan company's businesses. Thank you very much.


Our adjacent questions comes from Andre Masini from Citibank.

Andre Masini

Good greeting Rodriguez. Salgueiro, Felipe and nan team. Thank you for taking my question. Thank you for nan call. I would for illustration to, to inquire astir proviso concatenation and pricing. So pinch an betterment of nan proviso concatenation really do you spot nan pricing dynamics successful nan worst months of nan dynamic?

The proviso concatenation was really surgery and you opportunity that customers were little value delicate successful nan past, nan astir important was to person nan correct merchandise astatine nan correct time. Not galore group were doing that. Now, erstwhile we are backmost to normal, do you deliberation they are again, value delicate and location is much title based connected pricing?

Andre Rodrigues

And tin you perceive us? There is simply a small spot of echo, but we tin perceive you well. Last year, nan world proviso chain, we went done a period, particularly aft nan pandemic, erstwhile we had nan awesome effect of galore segments successful position of what was recurrent proviso of immoderate components. They started successful nan opening of nan pandemic and we are reporting normalization successful this process. And what I would for illustration to opportunity to you is that coming astir of nan effect we person seen has been normalized.

So astir of nan part, astir of nan parts that we usage successful our process, truthful freight, cost, readiness of ships, each of this has gone backmost to normal on nan past fewer quarters. And there, there's still thing missing successful position of physics parts, which still affects our automation products. But someway nan situation, particularly if we comparison to what it was during nan pandemic today, it's, it's overmuch amended than it was a fewer quarters ago.

Now, erstwhile arsenic we've gone backmost to normal, we'll beryllium capable to spot immoderate impacts in, successful operational terms, we are going to spot operational betterment and we person noted portion of that successful nan 4th fourth pinch a much affirmative rate procreation because of our inventory levels are going backmost to normal. So we person started this normalization process and this was only imaginable because we are successful nan process of improving that situation arsenic a whole.

As to competition, arsenic we said successful different calls, we person utilized nan opportunities arsenic we person a vertical exemplary and arsenic we we're very proactive successful position of that problem and we met nan needs of our customers very good on nan period. I deliberation that location should beryllium immoderate unit from immoderate competitors, but we don't spot that arsenic a risk. Most of what we built on nan past fewer years, we are going to proceed supplying from now one.


Our adjacent mobility comes from Alberto Valerio from UBS.

Alberto Valerio

Good greeting Sal, erstwhile Rodriguez, erstwhile again, congratulations connected nan amazingly very bully consequence that you are reporting. Could you springiness america immoderate colour connected whether location was immoderate power successful immoderate circumstantial area aliases surface science successful position of agelong cycles successful Brazil aliases successful United States aliases Europe because of a stronger separator than accustomed and weather? Well you person fixed immoderate of nan guidance for 2023. Another constituent I would for illustration to know, what is your inventory guidance like? So do you do FIFO inventory average?

So what should expect successful nan early because location was very beardown volatility successful nan commodities marketplace recently. Hi Alberto. As to margin, we person improved our margins successful practically each operations. So this is much aliases little successful line. There was nary important evolution, but erstwhile we comparison it to past twelvemonth successful arsenic compared to nan 4th fourth of 2021, location has been an improvement and astir of nan businesses I said is natural.

And we person that dynamics of short rhythm and agelong cycle. So we person seen that effect, particularly based connected nan 4th quarter. It continued and arsenic clip went by we saw normalization successful agelong cycle. So nary awesome business statement aliases nary merchandise statement was an outlier. So this is simply a accustomed process successful position of nan co recomposition of prices and nan costs structure, which was unchangeable on nan past fewer quarters and we saw this effect successful almost each merchandise line.

Andre Rodrigues

Alberto, this is Andrew Rodriguez talking astir nan proviso chain. What I tin opportunity is that we didn't person immoderate shortage successful earthy materials aliases generalized shortage. So this is simply a consequence of our verticalization, our blimpish inventory strategy that we person adopted complete nan past fewer quarters arsenic we person updated you connected that.

So this has helped and nan business is getting amended 4th aft quarter, however, it still has immoderate effect successful immoderate manufacture typical successful position of electro physics equipment. So successful this manner, what you tin spot is that nan much we spell backmost to normal, we tin trim inventory levels. So we tin comparison nan measurement of inventory that we had successful September. We had an betterment successful December, and we'll effort to find thing amended and amended 4th aft 4th arsenic things spell backmost to normal.

And past pinch regards to pricing, what I tin show you is that we are besides seeing smaller unit successful a costs building coming from earthy materials. And this thing that happened on nan 2nd half of 2022. Some earthy materials showed an accommodation of prices and present we tin mention copper and alloy and others specified arsenic physics parts are still astatine precocious levels of price. And we said a shortage successful position of commodities.

This is each backmost to normal and we talk astir physics parts. It's not correct to opportunity that nan aforesaid point happened. So erstwhile we answered astir that successful nan opening of 2022, we had an anticipation that nan components concatenation would spell backmost to normal aft 2023.

This is not happening. And what we are expecting is for it to spell backmost to normal aft 2024. And arsenic I said, if connected 1 manus location is simply a normalization successful the, successful position of commodities, what we person seen precocious was a reversal of trends successful commodity prices. I talked astir alloy and copper and they are way of accommodation, but precocious we saw immoderate unit connected those prices possibly because of nan opening of China. So today, now focusing connected inventory, we dream it will get amended on early quarters. Perfect. Thank you very much.


Next mobility comes from Marcelo Motta from JPMorgan.

Marcelo Motta

Good morning. I person 2 questions. First of all, could you springiness america much specifications astir nan CapEx for 2023? Some description successful EU and I would for illustration to understand much possibly depending connected nan segment, truthful wherever you are expecting much investments. And nan 2nd successful nan North American market, location are immoderate companies particularly reasoning successful position of inflation, successful position of labor. Can it unit mar margins this twelvemonth aliases not?

Andre Rodrigues

Hi Martha. I will talk astir CapEx successful 2023. The first point is that we person approved our superior fund for 2023. A number that is bigger than what we had successful erstwhile years. And truthful past twelvemonth it was BRL1.2 billion. And portion of what I americium going to opportunity is thing that we've been announcing and things that started successful 2023, and they're going to proceed successful 2023.

And fundamentally those investments are to support nan existent maturation of nan institution successful caller years. Our full CapEx, astir of it a small spot much than half was for nan overseas market. This year, 55% is allocated to Brazil and 45% to international. So present nan attraction successful UA to writer expanding our manufacturing capacity, a caller centrifugal factory, particularly for electrical motors. And because of nan bully capacity of a T&D successful Brazil nan squad wherever we person our transformers plant, we person caller investments to grow our mill there. In position of work proviso for transformers, IBA, caller acquisition that manufacturers toggle shape america much focused connected measurement equipment. So location is this co move that we are seeing successful nan T&D market.

As said earlier successful nan world marketplace successful Mexico, nan item is nan summation of capacity. The caller works for transformers is supplying nan United States included successful India past year, we reviewed our investment. So we opened a caller debased voltage electrical engines successful India and now we person mid and precocious voltage to usage nan abstraction to manufacture. I arrow generators 4.2 that we person nan volition of starting trading successful nan market, Portugal.

Two, we person an opportunity pinch industrials. This is nan attraction and this is wherever we are making nan investments. United States, aft we unfastened our 3rd transformers manufacturing plant, astatine nan aforesaid clip we announced description successful 1 of nan existing factories. And this description will beryllium complete successful 2023. And successful China we are going to summation capacity for business engines and to summation automation successful that country.

And portion of nan finance will besides beryllium focusing connected a changeless automation and modernization and robotization of our operations. It's important to opportunity that this superior fund I don’t know, possibly we will execute 100% of that magnitude successful nan twelvemonth arsenic we did successful past year's, but this is conscionable a snapshot and an overview of really we are going to allocate investments successful 2023.

Andre Salgueiro

Hi Marcelo, convey you for your question. As to ostentation successful United States, and we tin talk much broadly. So ostentation coming is simply a reality successful astir of nan world, not conscionable successful nan United States and successful Europe too. This was thing very beardown past twelvemonth and has immoderate impacts for nan costs structure.

And I would show you arsenic it is simply a Brazilian institution and we are very acquainted pinch that move successful Brazil and we cognize a batch astir it astir that matter and we are going to make each nan basal adjustments. We don't spot that arsenic a important consequence that wouldn't person immoderate important effect connected our margins aliases nan dynamics of our businesses. Thank you very much.


Our adjacent mobility comes from Rogerio Araujo from nan Bank of America.

Rogerio Araujo

Good greeting Salk. Congratulations connected your results. I person 2 travel ups. The first is astir transportation prices. There is simply a statement showing nan summation and a quality from rates world rates. Can you springiness america a breakdown, breakdown of really overmuch of that comes from exports and really overmuch of that comes from manufacturing extracurricular Brazil pinch a little complaint truthful that we cognize much what is related to transportation pricing?

And my 2nd mobility regards star power. Can you show america astir nan marketplace aft January 6th which was nan deadline? So what do you deliberation successful position of G and d immoderate lags successful position of nan placement of orders and really does is that related to deliveries? Thank you.

Andre Salgueiro

Hi Rogerio, convey you for your questions. Well, let's do nan breakdown of explanatory notes connected statement 27. We cannot study nan breakdown specifically. All I tin show you is that astir of nan effect connected that statement is related to nan trading, nan building of nan trading. Obviously location are different rates successful different operations pinch little rates than Brazil. And past this quality goes done that. But chiefly the, successful nan effect that you tin see, that is nan effect related to trading, that's to solar.

And location was a alteration successful regulations now connected January 7th and everyone knew that this was thing that had been, that was being discussed for a fewer years. And this caller regularisation has an effect connected distributed star procreation and it still includes a modulation play for nan projects that were revenge until January 7th.

We still person a modulation play depending connected really large nan task was. That tin scope from 120 days to almost 20 year. The bigger projects successful powerfulness plants from 1 to 5 mega. Those projects from January 7 will person 1 adjacent clip for implementation. So considering nan modulation that will still return spot on 2023, we are not imagining immoderate important effect successful star generation.

But past connected nan different manus we tin opportunity that this is business that is not apt to proceed increasing astatine nan aforesaid way gait arsenic it grew successful caller years. So erstwhile we look astatine star arsenic a full and it's been getting amended and better, and Andre said location is nan building of star procreation that is centralized successful nan past fewer quarters. When we look astatine star arsenic a whole, we tin ideate that star businesses will proceed to grow. So particularly successful 2023, we don't person immoderate awesome concern

In position of shrink successful revenues successful 20 20 23. We still request to spot truthful we person a short rhythm successful this area, but arsenic we get towards nan extremity of nan year, we tin update nan dynamics of that business, particularly nan outlook for adjacent year. It's very clear. Thank you very much.


Our adjacent mobility comes from Josh Milberg from Morgan Stanley.

Josh Milberg

Good greeting everyone. Congratulations connected your results. I person questions astir nan improvement of your business successful Asia Pacific Guru grew beneath mean successful 2022. Can you springiness america an updated position astir nan factors underlying this underperformance discussing nan effect of lockdown successful China successful India, and really you person nan challenges successful that marketplace arsenic compared to players from Mexico? A alteration to a much authorities controlled system successful much caller years.

And arsenic nan extremity of nan COVID-0 argumentation especially, are we going to spot a important betterment successful maturation complaint successful that region successful 2023? And successful our understanding, we cognize that it's not Asia, it's not typical successful your mix, but I inquire origin you person identified successful Day arsenic a part, arsenic portion of nan world wherever you person awesome ambitions for early years. Thank you very much. Did you understand my question?

Andre Rodrigues

Hi Josh. Yes, this is Rodriguez talking. Thank you very overmuch for your question. So I'll talk astir Asia-Pacific for sure. The lockdown successful China on nan pandemic ever since nan beginning. Yes, it had an effect successful our businesses and successful different companies too. Unfortunately, we are talking each nan clip to nan group successful our China plants and overnight everything that was implemented successful position of prevention and power was lifted and vanished arsenic they very were very speedy successful implementing it overnight. They conscionable lifted each nan rules successful position of limitation of circulation. And past it had an effect connected nan effect of successful nan country. Now we are expecting a reversal because of this opening

And this wide merchandise successful each operations that are taking spot since past December. I deliberation that nan first constituent is that we are opening nan twelvemonth pinch bully prospects for that region. And arsenic nan Chinese system improves, we are expecting maturation successful China and besides bully prospects successful India too.

When we talk astir Asia-Pacific, it's not conscionable astir China. We are talking astir truthful isolated from China, India is besides a state that really believes in. We are leaders successful gathering precocious voltage motors successful Brazil. We are delivering applicable projects and nan agelong rhythm portfolio pinch affirmative for this year. In operation pinch agelong rhythm businesses, we person opened successful portion for debased voltage for nan manufacturing of debased voltage engines.

And past location is our arrow generator and we want to commencement producing nan 4.2 megawatts aero generators successful that country. And erstwhile we talk astir Asia-Pacific, we person a bully capacity successful mining successful Australia and has a important presence. Is a well-known marque and present we harvester bully prospects that we are seeing some from China, India successful 2023.


Our adjacent mobility comes from Lucas Davis [ph] from Santander.

Unidentified Analyst

Good morning, Andre Rodrigues and Salgueiro and Felipe. In position of moving capital. So you said that 1 of nan attraction was to regularize operational improvements and rate procreation successful position of moving capital. So you show that pinch nan protection of inventory, which different initiatives do you intend to implement?

Andre Rodrigues

Thank you. Hi Lucas. I deliberation that nan main action wherever we are going to attraction is to amended inventory turnover successful nan companies. So nan mid clip for america to person truthful mean costs days it's different from companies than we spot mean payable days. It's smaller than compared to nan remainder of nan country. It's related it's amended and we usage this elasticity pinch components and earthy materials. In position of nan costs of products sold, nan main attraction of nan institution is for judge to amended inventory turnover. So we person had amended inventory turnover than what we had successful 2022.

We request to salary attraction astatine nan alteration successful nan business profiles. So arsenic we person businesses, a star that person go much applicable successful caller years. And truthful we person a important capacity successful star plates aliases star panels, and nan institution is very overmuch mobilized successful each levels successful each countries for america to activity improvements on this year.

Unidentified Analyst

You mentioned star panels successful inventory. There was a 20% simplification successful nan value of star panels because of simplification successful prices of earthy materials. And you are moving pinch a precocious inventory successful star panels. Is this going to effect your profitability locus?

Andre Rodrigues

Well, each this activity of reducing inventory and star panels, panels, this is thing that happened on nan 2nd quarter. We had an atypical business on nan first 4th without delays successful position of boarding because successful nan world proviso concatenation problems that had a antagonistic effect successful our inventory levels for panels. And we want to bring it person to normal successful nan 2nd quarter. So our levels coming are okay which makes it imaginable for america to compact our businesses without immoderate awesome risks.


Thank you very much. We now adjacent our questions-and-answer session. I would for illustration to springiness nan level to Mr. Andre Rodrigues for his closing remarks. Mr. Rodriguez, please.

Andre Rodrigues

Thank you very overmuch for your attendance. Have a very bully time and spot you connected our adjacent convention telephone erstwhile we denote nan results of nan first 4th of 2023. Thank you.


WEG's convention telephone has now ended. We convey you very overmuch for your information and we wish you a very bully day. Thank you.

Editor: Naga

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